Why Should Delaware Care?
The plans for several data centers in Delaware have garnered backlash from residents who are worried about their potential impact on energy costs and the environment. The outcome of this fight over environmental law will impact several of those proposals.
The plan for a massive data center near Delaware City received another major setback Thursday.
A state board unanimously upheld a decision from Environmental Secretary Greg Patterson that the data center is not allowed under the Coastal Zone Act, a landmark Delaware law designed to limit heavy industry along the state’s shorelines.
“I’m overjoyed,” said Dustyn Thompson, chapter director of Sierra Club Delaware, the environmental advocacy organization that has been critical of the project. “I think it was the right decision.”
But the case will likely be appealed to higher courts, and it could take years to fully resolve.
The verdict was delivered to a mostly empty auditorium after about 14 hours of testimony over three days.
Developer Starwood Digital Ventures earlier this month appealed Patterson’s decision to the Delaware Coastal Zone Industrial Control Board, a rarely-used administrative body in charge of deciding on appeals of the secretary’s decisions.
The Delaware General Assembly passed the Coastal Zone Act in 1971 to protect the state’s environmentally sensitive shorelines by prohibiting new heavy industry from them.
In his decision on the Starwood proposal, Patterson pointed to the data center’s proposed use of 516 backup diesel generators, which would operate in the case of a power outage or other emergency situation, as a reason for the heavy industry classification.
Together, they would rely on 2.5 million gallons of stored diesel, which Patterson called “entirely unprecedented” in his ruling.
Starwood’s attorneys from Wilmington-based Richards, Layton & Finger argued that the data center plan, dubbed Project Washington, does not have the characteristics of heavy industry.
“The Secretary has distorted what Project Washington is… and ignored binding case law in order to find a way to prohibit this project,” said lawyer Katharine Mowery, who represented Starwood at the hearing.
In recent years, the data center industry has been among the fastest growing in the country, with investors seeking the profits from an ongoing artificial intelligence boom. The exuberance appeared in Delaware in recent months with developers proposing several data center plans.
One of them, proposed near land that hosts the popular Halloween attraction Frightland north of Middletown, also sits within Delaware’s coastal zone boundaries and may have to comply with the provisions of the act.
Kenneth Kristl, former director of the Environmental Rights Institute at Widener University’s Delaware Law School, said previously that he thinks the losing side will likely appeal the decision to the Delaware Superior Court, then the Delaware Supreme Court.
He said he thinks the whole process will take between 18 months and three years.
Arguments rely on definitions
The hearing was mostly a calm deliberation of the specifics of the Coastal Zone Act and whether data centers are a heavy industrial use.
Starwood’s lawyers argued that Patterson misdefined the data center plans by calling its 516 generators a “tank farm.” They called PBF Energy Senior Operations Director Jeff Hersperger as a witness, who said the generators are “not even a cousin to a tank farm.”
“If I go out in the airport and there are 4,000 cars there, and each of the cars has a 3-foot-by-3- foot gas tank on it, can I calculate that into acreage and convert that into a tank farm? Because that’s what you’re doing,” Hersperger said to DNREC’s lawyers.
PBF Energy owns the land slated for the data center.
During the board’s deliberations, member Willie Scott said exact definitions of these phrases are “kind of irrelevant.”
“They’re emission points, and they’re emitting enough to constitute themselves, as a collective, as a major source of air pollution,” he said.
Starwood’s attorneys also argued that Patterson should not have relied on a worst-case scenario when calculating the potential emissions from the backup generators.
In its Coastal Zone application, Starwood reported that the maximum possible hours the generators could operate would be 500 hours, or a little over 20 days, per year.
“Under this worst-case assumption, this proposed campus has the potential to emit more tons of nitrogen oxides than any other industrial use in the coastal zone, with the exception of the Delaware City refinery,” Patterson said in his decision.
Experts who testified on behalf of Starwood said that the generators would very likely operate for less than 20 hours a year based on testing requirements and the amount of power outages Delaware has faced historically.
But Suzanne Glatz, former director at the regional power grid operator PJM, testified on behalf of DNREC that data centers may need to use their generators more often than in the past because of regional power shortages.
The U.S. Secretary of Energy earlier this year issued a notice that his department would begin requiring large energy users to start using their backup generators to prevent power outages, rather than waiting for them to happen.
That kind of proactive use of generators could happen more often as more energy-hungry data centers join the grid, Glatz testified.